Welcome back, everyone.
Once again the Iran headlines are flowing back through the Strait and Oil is not happy. The ones calling on higher inflation resulting in a market selloff are thinking a breaking point is coming. Well we got news for them.
Not happening.
They forget the one factor of markets that are potentially the most important. Markets are forward facing. If inflation is to rise but this will be proven to be temporary then this news will be shrugged off. All they have to do is pay close attention to when I call selloff and they would do very well. Very few, if any, called the Carry Trade sell and the Iran war sell as accurate as us. Granted we missed the low for longs but that’s what happens when your main goal is to capture a trend.
Plenty to cover today so let’s begin with the S&P recap:
This week started off well in our favor with the market selling off from the 7273 POC. Nearly 80 handles of downside came which took price all the way down to the 7193 POC, the lower end target for the week. Just as we expected, selling was due early in the week.
Take a look at what was said in yesterdays letter:
Our main focus now is if we can remain above a key support level to take price right back up to 7300 highs. More on this in the S&P Levels section. Let’s turn to two stocks that are primed for strong upside but have yet to show signs of relief.
Questionable Recoveries
Two stocks that were once quite strong have yet to solidify a low. All around we have plenty of stocks at highs or coming close to making one. Yet MSFT and TSLA still have yet to see any positive developments. They remain in a negative EMA stack but are starting to find some sort of support. There’s really no telling when these stocks will close this gap between the 10-week and 21-week EMA. All we can do is patiently wait for the crossover to come with a weekly close over both moving averages.
Both of these will likely pose strong trends when the day comes but for now we will avoid. While all four indexes are bullish, it’s not in my best interest to focus on shorts. Most of the shorts that happen are once the SPY and QQQ see the negative EMA stack crossover. That’s not to say shorts will not work but more so used as a safety precaution. Index strength brings a natural bid to stocks as a whole unless there’s a clear catalyst to outweigh the tide.
On the catalyst side, not one problem arises for either company. MSFT will be a dominant figure for AI while TSLA will continue to push headlines on future plans. This is nothing out of the ordinary and is building a strong coil for these two stocks to see powerful upside in the future. MSFT specifically has had warning signs for weeks and we posted warnings not to touch this stock. Since then the stock is on pace to close lower for the third week in a row.
TSLA, business as usual, pumping the stock on dreams which Elon is phenomenal at. Whether you believe the headlines or not, if money flows into the stock then there’s no questions needed to justify a rally. Simply wait for the crossover and the weekly closing price above to catch a strong upside move. While the stock was at lows during the resolution of the Iran war, we called on LEAPS. This was sent over on X for both TSLA and NVDA. Unfortunately TSLA had little follow through in pushing for a positive EMA stack and has resulted in sideways balance. Two weeks ago we parted with this idea and will leave it in the watchlist for when the crossover comes.
Having an opinion on a company is completely fine but your job is to keep that separate from intentions with the stock. All you need to focus on is the actual price.
Markets consistently misprice instruments and traders/ investors continue being caught on the wrong side even when being correct. Allow the market to tell you when your correct rather than you trying to tell the market what to do. One recent example of this can be TSLA. Anticipation of an uptrend was there once price broke over the 10-week EMA but plenty of work needed to be made to make the uptrend official. Luckily price remained sideways for an easy exit but luck is simply luck.
This is a reminder that you will not predict markets but a robust system can reward you overtime. Your job is to stack the odds in your favor and this recent example of TSLA was the opposite.
Outside of MSFT and TSLA, we did send out an update inside chat with a stock that has touched support this week. Currently bouncing off the 21-week EMA while the EMA stack is positive. If you want access to this along with the 5 other stocks sent in last two weeks, click the button below:
Now we will shift our focus to the Volume Profile structure on the S&P.
